Pulling a little money out of IRA to qualify for ACA subsidy... ethical?

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  • hoosierdoc

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    Let’s say you’re retired and living on a sailboat. You are 48 years old. You have no income. So you pull out $22k from an IRA and pay a penalty on that amount, in order to get a $13,000 subsidy on your ACA policy for you and your wife.

    is that ethical?

    Is that wrong?
     

    CampingJosh

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    They defined it as income, so they are stuck with treating it as income.

    I don't like that our system is so complex that 100,000 loopholes exist, but at some point you just have to admit that they aren't loopholes: they are the point. Our tax system is intentionally complex so that the beneficiaries are obscured. It's not designed to be fair. It's designed so that those who know how to benefit can do so.

    So doing something like this is, as I see it, doing exactly what Congress intended when they chose to write such a ridiculous tax code.
     

    rob63

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    I think you can make the case that playing by the rules is playing by the rules. However, if you are upset when other people use the rules to their benefit, then you are perhaps being hypocritical if you do the same thing. I don't really see this as morally any different than living on government benefits instead of getting a job.

    Ethically, I think you should play by the "spirit" of the rules rather than the actual letter of the law. Unfortunately, it doesn't really get you anything besides peace of mind. How important that is probably varies from person to person.

    In any case, I would like more details on exactly how pulling money out of an IRA and paying a penalty helps you qualify for an ACA subsidy?
     

    hoosierdoc

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    If you pull money out you have “income” right? There are calculators that tell you the subsidy you get based on your age, family size, and “income”
     

    Fargo

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    In a state of acute Pork-i-docis
    I think you can make the case that playing by the rules is playing by the rules. However, if you are upset when other people use the rules to their benefit, then you are perhaps being hypocritical if you do the same thing. I don't really see this as morally any different than living on government benefits instead of getting a job.

    Ethically, I think you should play by the "spirit" of the rules rather than the actual letter of the law. Unfortunately, it doesn't really get you anything besides peace of mind. How important that is probably varies from person to person.

    In any case, I would like more details on exactly how pulling money out of an IRA and paying a penalty helps you qualify for an ACA subsidy?
    Mmmm, I will start giving the congress/IRS the benefit of the "spirit of the rules" when they start behaving the same way. They are the ones enforcing the seizure of my property.

    Remember, these are the same folks who tried to tax stock splits as taxable income, because well now you have twice the number of shares. These are the same people who said that American citizens who lost their property in the fall of Saigon shouldn't receive the benefit of the wartime destruction exemption.
     

    rob63

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    Mmmm, I will start giving the congress/IRS the benefit of the "spirit of the rules" when they start behaving the same way. They are the ones enforcing the seizure of my property.

    Remember, these are the same folks who tried to tax stock splits as taxable income, because well now you have twice the number of shares. These are the same people who said that American citizens who lost their property in the fall of Saigon shouldn't receive the benefit of the wartime destruction exemption.

    If you base your ethics upon what others do, then you no longer actually have moral principals, you are simply following the crowd. There's nothing wrong with feeling justified in following the rules as they are laid out, just don't pretend that is the same thing as being ethical.
     

    Fargo

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    If you base your ethics upon what others do, then you no longer actually have moral principals, you are simply following the crowd. There's nothing wrong with feeling justified in following the rules as they are laid out, just don't pretend that is the same thing as being ethical.
    Just what ethical principle do you think is violated by paying your taxes within the rules that are imposed on you? Did you make these rules? Did you have meaningful input in creating them?
     

    rob63

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    Just what ethical principle do you think is violated by paying your taxes within the rules that are imposed on you? Did you make these rules? Did you have meaningful input in creating them?

    Since when is applying for government subsidies for healthcare the same thing as paying taxes? I suppose you can say pretty much anything is ethical if you switch all of the concepts around enough.
     

    KittySlayer

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    I think you can make the case that playing by the rules is playing by the rules.

    That is what the legal precedent is that I learned long ago in Tax Law class. Congress would not have passed the law in the format they did if they didn't want you to follow it. If Congress deems your use of the rules they set inappropriate then they can change the law.

    "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes.
    Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any
    public duty to pay more than the law demands."
    -Judge Learned Hand, Helvering v. Gregory, 69 F.2d 809, 810 (2d Cir. 1934), aff'd, 293 U.S. 465 (1935)

    It's all part of the Grand Illusion. Enjoy your sailboat.

    220px-Come_Sail_Away_-_Styx.jpg
     

    Pyro

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    I'm still enjoying that image of being 48, retired and living on a sailboat.:cool:
    Being 48 this year I'm also enjoying that thought. :-)

    Now to the question, I'm a rule follower. You didn't make the rule, you're just following it.

    As to ethics we must first answer "Is it ethical to force people to purchase insurance at a much higher premium to pay for others being granted "free" healthcare from your purchase" if you believe the answer is .. well technically yes or no you are well within your rights to use the same laws / rules to protect what you have earned.

    Ethical ... I'd sleep well tonight.
     

    BehindBlueI's

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    Just what ethical principle do you think is violated by paying your taxes within the rules that are imposed on you?

    Manipulating your 'income' to take advantage of subsidies designed for the poor while not actually being poor? No different then eating at a soup kitchen when you have plenty to eat. Against the rules? No. Ethical? No.
     

    DoggyDaddy

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    Manipulating your 'income' to take advantage of subsidies designed for the poor while not actually being poor? No different then eating at a soup kitchen when you have plenty to eat. Against the rules? No. Ethical? No.

    But didn't they tie the ACA to taxes? Penalizing you with a "tax penalty" if you don't buy insurance? People manipulate their income all the time (legally) to reduce their tax burden. I don't see this as much of a stretch.
     

    amboy49

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    I have a friend who is self employed and he receives a goodly per cent age of his income in cash. I guess he is somewhat absent minded because he forgets to report all of that cash income. He has also said he makes quite liberal use of the business “expenses” that he incurs annually as well.

    As a result his taxable income is minuscule if not non existent and he, therefore, qualifies for Obamacare. In my opinion he is actually sticking it to the government twice by not paying taxes AND accepting the subsidy. IÂ’m basically subsidizing him since my income is derived from W-2 and 1099 revenue. When I give him a hard time about it he just laughs.

    Ethical ? Not hardly ! ! HeÂ’s gotten away with it for decades. If everyone actually followed the tax guidelines, as messed up as they are, there would be a monumental budget surplus. As it is, I would venture a huge majority of tax returns are falsified.

    Heaven forbid we should attempt to curtail the excesses. Only those of us who do pay our taxes are the actual suckers ! !
     

    rob63

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    I have a friend who is self employed and he receives a goodly per cent age of his income in cash. I guess he is somewhat absent minded because he forgets to report all of that cash income. He has also said he makes quite liberal use of the business “expenses” that he incurs annually as well.

    As a result his taxable income is minuscule if not non existent and he, therefore, qualifies for Obamacare. In my opinion he is actually sticking it to the government twice by not paying taxes AND accepting the subsidy. IÂ’m basically subsidizing him since my income is derived from W-2 and 1099 revenue. When I give him a hard time about it he just laughs.

    Ethical ? Not hardly ! ! HeÂ’s gotten away with it for decades. If everyone actually followed the tax guidelines, as messed up as they are, there would be a monumental budget surplus. As it is, I would venture a huge majority of tax returns are falsified.

    Heaven forbid we should attempt to curtail the excesses. Only those of us who do pay our taxes are the actual suckers ! !

    I'm afraid that appears to be the case. Everyone else seems to think that receiving subsidies is the ethical thing to do. Heck, this thread just converted me to being in favor of single payer healthcare, at least I would be eligible too instead of just being one of the suckers that helps pays for it.
     

    miguel

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    Let’s say you’re retired and living on a sailboat. You are 48 years old. You have no income. So you pull out $22k from an IRA and pay a penalty on that amount, in order to get a $13,000 subsidy on your ACA policy for you and your wife.

    is that ethical?

    Is that wrong?

    Our nation is dropping towards Hell at 9.81 m/s/s -- take the $22K and SOCK IT TO THE MAN!!!
     

    Jackson

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    Let’s say you’re retired and living on a sailboat. You are 48 years old. You have no income. So you pull out $22k from an IRA and pay a penalty on that amount, in order to get a $13,000 subsidy on your ACA policy for you and your wife.

    is that ethical?

    Is that wrong?

    The ACA subsidy is based on income. Lower income = higher subsidy. How does creating income by taking a Traditional IRA distribution increase your subsidy? I'm curious about that part. Any help is appreciated.
     
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